How to Invest in South Korean Stocks
If you are looking at investing in South Asian stocks, then a really good bet is the South Korean stock market. It’s Gross Domestic Product (GDP) is ranked 12th in the world, according to the World Bank.
Why Should You Invest in South Korea?
The country is also one of the most technologically advanced in the world, employing the fastest broadband speeds anywhere across the planet. South Korean has also used its technological capabilities to build a strong digital economy in government, education, commerce as well as entertainment.
And because of the many tax benefits provided by the Korean government, more than 50% of the world’s Global Fortune 500 companies have invested in this country.
Added to that, South Korea has also established a massive Free Trade Agreement (FTA) that have connected the country to the United States, the European Union and ASEAN.
Another area that is fast showing massive business potential is the Korean Wave. All things Korean are becoming hugely popular across all the corners of the globe, be it fashion, music, film, food, cosmetics and even culture.
So, if you are looking at growing your investment portfolio, this is a good place to do so.
How Can I Invest in South Korean Stocks?
There are many ways in which you can invest in South Korean stocks.
Find the Right Platform
You can find the right global asset management platform that gives you access to Korean stocks, and it doesn’t necessarily need to be a South Korean platform. There are a large number of platforms that provide you with the opportunity to invest in this country.
If you are not a very experienced investor, then it is best to use the services of an asset management firm that has the experience and the platform to do the investing for you.
Of course, you need to keep asking questions and stay informed on what they are doing with your money, and grow your own knowledge base.
Broad Market Index
An easy and low-cost way to invest in South Korean stocks is the broad market index, using ETFs (exchange traded funds). You get instant diversification using just one security traded on the American stock exchanges.
There are three different ways through which you can invest in Korean stocks using ETFs.
Using Indices on South Korean Stocks
The best index that is tracked by 5 different ETFs is the MSCI Korea Index, where the TER (total expense ratio) of the ETFs ranges from 0.45% to 0.74% per annum.
The best South Korea indices today are:
- iShares MSCI Korea UCITS ETF (Acc)
- iShares MSCI Korea (Dist.)
- HSBC MSCI Korea UCITS ETF USD.
The cheapest South Korean ETFs are:
- Lyxor MSCI Korea UCITS ETF (Acc)
- iShares MSCI Korea UCITS ETF (Acc.)
- HSBC MSCI Korea UCITS ETF USD.
Using the Asia-Pacific Indices
South Korean indices are not the only way to invest in ETFs for Korean companies. There are 4 Asia-Pacific indices that you can invest in for Korean stocks. These 4 indices are tracked by 11 different ETFs.
The 4 indices are:
- The MSCI AC Asia Pacific Ex-Japan: This index tracks stock markets in developed as well as emerging economies of the Asia-Pacific region, but not Japan.
- The MSCI AC Asia Ex-Japan: This index tracks stocks in developed and emerging economies in Asia, but not Japan.
- The MSCI AC Far East Ex-Japan: The index tracks stocks in markets of the East Asian region, but not Japan.
- The MSCI Emerging Markets Asia: This index tracks stocks of large as well as mid-cap companies in emerging markets in Asia.
Using the Emerging Markets Indices
There are two different emerging markets indices that you can use to make investments in South Korean stocks. These two indices are tracked by 14 different ETFs, so you can a pretty good range of choices. The two indices are:
- MSCI Emerging Markets: This index tracks all emerging markets across the world.
- S&P SMIT 40: This index tracks the 40 leading companies of 4 emerging markets – Turkey, Mexico, Indonesia and South Korea.
American Depository Receipts (ADRs)
Another way to develop your wealth management portfolio is by investing in ADRs. This way, you can purchase South Korean stocks on a United States stock exchange.
The downside to investing via ADRs is that they are not as liquid as regular American stocks, so you should be careful when trading with them. Some of the most popular ADRs are SK Telecom Co., Ltd., LG Display Co. Ltd., and KB Financial Group Inc.
A Word of Caution
There is only one word of caution here. When you invest in South Korea stocks, you need to be aware of the geopolitical risks of the region. The country is located in one of the most militarized regions on the globe, i.e., South Korea is neighbors with North Korea.